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5 big analyst AI moves: Nvidia hiked to $1,100 at UBS; SNOW, MDB get a downgrade

Published 03/24/2024, 06:11 AM
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Investing.com -- Here are the biggest analyst moves in the area of artificial intelligence (AI) for this week.

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UBS: Nvidia is 'the only chip company that can create its own market'

On Thursday, UBS analysts increased their price target for Nvidia to $1,100 from the previous $800, emphasizing that the tech giant is “the only chip company that can create its own market.”

After the unveiling of Blackwell and participation in several GTC sessions, UBS believes that Nvidia (NASDAQ:NVDA) is on the verge of tapping into a fresh surge of demand from both global enterprises and sovereign states.

Looking forward, the investment bank predicts a significant growth year for Nvidia in calendar 2025, with the company's revenues expected to approach $150 billion, representing an estimated 30% increase.

This projection has led to an upward revision of both revenue forecasts and the price target for Nvidia.

With the launch of Blackwell and NIM - a new software platform developed to streamline the deployment of custom and pre-trained AI models into production environments – UBS analysts anticipate a boost in Nvidia's AI solution offerings, stating this “should also accelerate the distribution flywheel for NVDA's AI solutions to ride alongside enterprise software.”

“The entire framework creates a central distribution structure similar to an app store and given the vast array of companies to potentially license NVDA's AI Enterprise software ($4500/GPU/yr), monetization can add up quickly.”

Rosenblatt raises Micron price target to street-high

In the wake of its blockbuster report, a Rosenblatt analyst significantly hiked the price target on Micron (NASDAQ:MU) from $140 to $225, suggesting more than 100% upside potential from current levels.

“HBM3e alone will drive most of the DRAM structural shortage through calendar 2025, with the new category almost fully allocated for that year,” the analyst said in a note.

They highlighted a significant turnaround for Micron, projecting a jump in its market share in the HBM (High Bandwidth Memory) sector from negligible to low 20s percentage, attributed to both industry shortages and Micron’s development of power-efficient solutions that outperform competitors.

By the end of FY24, Rosenblatt expects to see a reduction in wafer capacity, which had peaked in FY22. This reduction, according to the analyst, will contribute to DRAM and NAND supply growth falling short of the anticipated mid-teen demand increase in 2024, prompting a rise in prices throughout the year.

Furthermore, the analyst anticipates a sustained DRAM up-cycle going into 2026, fueled by the AI server market's transition to the more advanced HBM4 technology.

“Note that accelerator compute (Blackwell/Hopper, MI300, custom ASIC, and such) will not scale without DRAM bit content AND performance (HBM), meaning the category is desperately price inelastic,” the analyst explained.

“The memory cycle we are about to witness will be the biggest in history, driven by an AI cycle that is revolutionizing compute in a secular fashion.”

Market is ‘under-appreciating’ Apple’s Edge AI efforts - Morgan Stanley

Analysts at Morgan Stanley said this week that the market is currently “underappreciating Apple’s Edge AI initiatives,” which could act as a potential catalyst for the stock going forward.

Reaffirming an Overweight rating with a $220 price target on Apple (NASDAQ:AAPL), the firm sees a favorable risk-reward ratio at the current stock price.

They believe that the forthcoming generative AI solutions “can more than offset other, commonly cited, investor concerns (China demand, DOJ lawsuit) to catalyze outperformance."

Although Morgan Stanley recognizes that overcoming the current negative market sentiment—stemming from concerns over demand in China and the ongoing antitrust lawsuit—may take time, they are optimistic about the future.

The analysts highlighted Apple's early June developer conference and the mid-September iPhone 16 launch as potential stock catalysts.

According to them, these events "can improve investor sentiment and reinvigorate the bull case, as compelling new AI features embedded into the iPhone 16 can catalyze an iPhone upgrade cycle - historically a key driver of outperformance - and accelerate Product/Services spend per user as Apple becomes the leader in Edge AI.”

Redburn demotes MongoDB, Snowflake on lack of ‘clear GenAI advantage’

Redburn Atlantic analysts have downgraded Snowflake (NYSE:SNOW) and MongoDB (NASDAQ:MDB) to Sell from Neutral earlier in the week, saying the companies “lack a clear Gen-AI advantage, posing a budget reallocation risk that their current valuations do not reflect.”

According to Redburn, the real potential of generative AI extends beyond notable consumer applications.

While Big Tech may cover initial training expenses, the true worth is seen in tailoring these technologies for enterprises. This customization, though, comes with high costs and complexity, requiring extended periods for integration, which ultimately fosters substantial, lasting advantages.

“In this new era, the focus shifts from sheer data volume to accessibility and quality. While enterprises aim to leverage existing data, high-quality synthetic data residing within some models is often overlooked,” analysts said in the note.

“Enterprise Gen-AI adoption is not a universal win. We expect budget reallocation risks for players without clear, direct exposure to the new stack. Those positioned to deliver tangible Gen-AI benefits are best placed.”

Correction in AI beneficiaries is a buy opportunity - UBS

UBS strategists believe the recent downturn in AI-related tech stocks presents an investment opportunity, they said in a note released on Monday.

Following a surge in early March, driven by enthusiasm for AI's commercial prospects, tech stocks have faced a downturn.

By March 15th, the Philadelphia Semiconductor Index and the S&P 500 Semiconductor & Semiconductor Equipment Index both experienced over a 6% drop within six sessions, reflecting revised economic expectations among investors.

Despite this, UBS does not view the decline as indicative of a long-term concern.

“We believe price corrections in major AI beneficiaries could present investors with a buying opportunity since we expect AI companies to continue to benefit from infrastructure development and transparent corporate spending intentions,” said UBS strategists.

“We think generative AI will prove to be the growth theme of the decade. With estimated revenue growth for the AI industry around 70% each year until 2027, we forecast strong earnings growth and higher equity prices in the coming years for the next AI leaders.”

UBS recommends expanding tech portfolios beyond the Magnificent 7, citing the tech downturn as an opportunity for diversification. They suggest investing in emerging AI leaders, including custom AI chip makers, AI edge computing firms in Asia, and major semiconductor capital equipment companies, to mitigate risks from market overconcentration.

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